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Business Opportunity in Turmeric Processing

Turmeric (botanical name-Curcuma Longa), one of the most important spice crops in India, is used to colour and flavour the food products.The yellow pigmented fraction of Turmeric (Curcumin,)is used as a colourant in food products and also as an anti-inflammatory agent in medicinal formulations.

India is the largest Turmeric producer in the world, with an annual production of nearly 10 lakh tonnes, accounting for nearly 80 per cent of world’s production. In India, Telangana is one of the largest producers of Turmeric, followed by Andhra Pradesh, Tamilnadu and Maharashtra (see picture 1).

Turmeric processing technology

Turmeric can be processed into two products Turmeric powder and Turmeric extracts including oleo resins and Turmeric oils.Turmeric oleo resins/oils are extracted through solvent extraction of turmeric powder. The solvent extraction plant can process a variety of spices including Capsicum, Pepper, Amla, Marigold etc. A plant of a capacity of 500 kg per day requires land of 20,000 square ft. and power load of 60 HP.

Since the extracts (oleo resins) are used in food preparation/pharmaceuticals and largely cater to exports, the oleo resin extraction operations have to be compliant with the USFDA, and European food safety guidelines. The companies that manufacture extracts usually obtain certifications such as HCAAP, Kosher, and Halal.

Key Players

Turmeric powder

The Turmeric power manufacturing is mostly done by micro enterprises and there are a number of players in each region. Additionally, most large spice powder manufacturers such as MDH spices, Everest Spices, Aachi Masala also sell turmeric powder.

Turmeric oleoresins and oils

This segment has a number of large players as well as SMEs. The large companies extract oils from a number of spices and their products are targeted at export market. (See table 1). These are mostly based in Kerala, due to easy availability of spices. In addition to these large players, there are a number of SMEs that are spread across spice growing states such as Tamilnadu, Andhra Pradesh, Karnataka, Gujarat etc.

The capital investment required for a Turmeric powder unit would be under Rs. 50 lakhs for a capacity of up to 2 tonnes per day. Since there is limited value addition in the powder manufacturing process and the manufacturer has to pay large commissions to distributors and retailers, the operating margins of such manufacturers would be thin and profitability would depend on their ability to sell large volumes.

Capital investment in Turmeric extraction capacity of 500 kg per day could be up to Rs. 2 crores. The profitability would depend on the spread between the oleo resin and Turmeric price and the yield of the extraction process. A tonne of turmeric can yield anywhere 4-5% of extracts. Assuming that a tonne of turmeric yields 40 kgs of Curcumin (95%) and 30 litres of oil, the gross margin calculation is as under

Table 2. Turmeric Oleoresin Processing: Profitability

kgs

Price (Rs/kg)

Value (Rs.)

Turmeric

1000

93

93,000

Solvents

46,500

Total Raw material cost

1,39,500

Oleo Resin

40

4498

1,79,920

Oil

30

100

3,000

Total revenue

1,82,920

Spread (Oleoresin-Turmeric)

43,420

Spread (%)

24

Note: The prices of Turmeric and its Oleo resin are based on export data of 2017 provided by DGFT

The overall profitability and return on investment would depend on the producer’s ability to secure regular orders. Further, any value addition to the products by developing formulations based on the extracts can improve revenues as well as profitability.

Why Turmeric processing may be an attractive opportunity

Demand for Turmeric extracts is growing rapidly in foreign and domestic market. For example, India’s Turmeric extract exports have tripled over the past three years from Rs. 150 crores in FY 15 to Rs. 500 crores[2] in FY 18.

The infrastructure availability (cold storage, common infrastructure for grading and sorting of agri products) for food processing industry is improving as government is providing incentives for development of food parks/spice parks etc. Further, food processing units are also being given incentives in the form of capital subsidies to set up and expand their businesses.

[1] Source: report on state wise/spice wise production by Spice Board Of India

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Introduction

Natural gums are plant products, formed by the disintegration of plant cellulose. These are typically extracted from seeds of plants like Guar, Tamarind, Cassia tora, etc. These are polysaccharides that increase the viscosity of solutions even when added in very small quantities. Natural gums are preferred over synthetic gums in food applications.

The natural resins, gums, gum-resins (NRG) and balsam’s global market are estimated to be about 1358.44 million USD. India is the second largest supplier of natural resins & gums in international market, with a share of 16.8%, next to France, which has a market share of 26%[1]. In India, the Guar gum has a lion’s share in total NRG production as well as in exports. Therefore, the focus of this blog is on guar gum.

Guar gum-Industry at a Glance

India enjoys monopoly in the Guar gum industry with a market share of over 80%, as it has the most suitable climate for Guar gum cultivation. The Guar industry is driven by the export market, as more than 70% of domestic production is exported. The major export destinations are USA, China, Canada, Germany & Russia. Rajasthan is the largest guar producing state followed by Gujarat, Haryana and Punjab. Rajasthan alone accounts for 70% of the total production in India.

Guar Seed Cross – section and Process flow

The guar seed has 3 parts – Germ (40-45% of the weight), Endosperm (38-45%) and Husk (14-16%), as shown in figure – 1. The gum powder is produced from endosperm in a two stage process. In the first stage, the guar splits are produced and the by-product is Guar Meal (67%) (Korma – 37% & Churi – 30%). The splits are then pulverized into gum powder, and the powder is further processed into various derivatives.

Demand & Supply

Guar consumption was been around 22.7 lakh tonnes in the year 2016-17. The consumption is volatile and varies depending on the export market, which accounts for more than 70% of the domestic production. The graph depicts the trends in consumption of guar seed in the past decade.

Chart 1: Consumption of Guar seed in export and domestic markets from India

Globally, oil and gas industry is the biggest user and domestically food industry is the largest consumer of Guar gum. (See chart 2&3). The sector wise demand of guar gum powder in international & domestic market is shown below in Chart 2 & 3.

On the supply side, there are more than 600 guar processing units in India with an installed capacity of around 10 lakh tonnes. The present capacity utilization of the industry is less than 50%, due to weak demand from the export markets. However, the demand is expected to increase due to increasing oil prices, which result in higher capital expenditure on oil exploration related activities.

Price Volatility of Guar Gum

The prices of guar gum powder is highly volatile (see chart 4) and are a function of factors such as crop cultivation, shale oil and gas exploration, availability and price of substitutes, etc. The users shift to the substitutes based on price competitiveness. But guar gum has its own advantages, for example: Guar gum is soluble in both hot and cold water as against Tamarind Kernel Powder (TKP), which is soluble only in hot water. The various substitutes to guar gum are discussed in Table 2,

Chart No.4: Per kg [2] variation of Guar gum prices over a period of years

Guar Gum v/s TKP

Among natural gum, Guar gum faces competition from TKP. TKP is derived from the tamarind seed. It has excellent water absorption property and high viscosity as well. The application includes, thickening agent in sizing process of textile & printing industry and binding agent in pharmaceutical industry. The detailed comparison of Guar Gum & TKP is shown in Table No.3,

Investment

The minimum viable capacity is 6TPD (6 tonne per day) and the investment required to setup guar gum powder from Guar splits is INR 4 Cr, including the civil structure, machinery and working capital. The capital cost would increase by INR 2-3 Cr, if one is manufacturing the powder directly from the seed due to the additional investment in plant & machinery and working capital. The Breakeven period is more than 5 years.

Profitability & Governing factors

The profitability depends on the conversion margins, or the spread[3] between the guar gum and guar seed price. The spread has been volatile and has ranged between 1.4 times to 3 times over the past decade. The profit margin can be increased by having control over the seed price, by engaging with farmers in contract farming. The profits/high returns can also be improved by making value added products for specific industry such as dairy/oil.

Why Guar Gum is an interesting opportunity?

The international demand for Guar Gum from oil and gas sector is likely to increase following higher oil prices. The demand from food sector from both domestic and international markets is likely to remain strong.

Given the availability of idle domestic capacity, one could look at purchasing or leasing existing units, thereby reducing the initial capital investment. Instead, the investment could be made towards research and development to develop new derivatives for food and other applications.

How Can We Help?

If you are interested in starting up natural gum manufacturing unit, we can assist you in the following:

Identifying potential markets including domestic as well as international.

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Introduction

Plastics are the 6th largest traded products, globally. Indian plastic exports are estimated to be around $ 7.6 billion[1] (Rs. 45,000 crores), accounting for around 3 per cent of our total exports. Top destinations for Indian plastics include USA, China, UAE and United Kingdom. There are over 2300 exporters[2] in India, largely located in Maharashtra and Gujarat. The exporters include both large manufacturers such as Garware-Wall Ropes Ltd, Supreme industries Limited and a number of small and medium enterprises.

[2] There are around 2300 exporters registered with the Plastics Export Promotion Council

Raw materials (polymers) account for around 30 per cent of our plastics export and value added products for the remaining 70 per cent. Among value added products, plastic sheets, woven sacks, table and kitchenware are the key products. The exports of these products have increased at a CAGR of around 12-20 per in the past decade (Table 1)

How To Tap The Export Market

Entering the foreign requires a lot of preparation towards market research and product development, as the products have to meet the requirements of new customers, who may have different standards of quality, design and product packaging. Also, diversifying into exports entails extensive documentation of company’s processes related to quality, purchase and sales, thus requiring a few dedicated resources. As such, venturing into export market comprises following steps:

Select The Market

Markets can be selected based on size of the opportunity, ease of entry and company’s competitiveness vis a vis other suppliers. The below given graph highlights key markets for various plastic products.

Table 2. Top export markets for key Plastics products

HS code

Item

Country

Country’s share in Indian plastics exports

39269099

Miscellaneous plastic products

U. S.

21%

Canada

6%

UAE

4%

39232990

Plastic sacks & bags

U.K

13%

U.S.A

8%

Canada

6%

39239090

Plastic articles for conveyance and packaging such as plastic crates

U K

12%

U A E

10%

U S A

9%

39269080

PP articles

U S A

61%

Spain

5%

Brazil

5%

Source :Directorate General of Foreign trade

As can be seen, the key markets are different for each category of product, for example in FY16, UK accounted for the highest share in exports for plastic bags and sacks, whereas USA was the largest buyer for polypropylene (PP) products. One can do a detailed market analysis to understand the key consumer countries as well as other suppliers that are supplying to the same market and the competitiveness of your goods vis a vis other suppliers.The competitiveness of the product also gets impacted by the trade and non-trade barriers as explained below.

Trade Barriers

These refers to custom related tariffs, anti-dumping duties that are imposed on the imported products by the countries so as to protect their domestic industry. For example, recently Govt of USA announced its plans to levy a tariff of 25% on imported steel and a 10% of Tariff on imported Aluminium products from a number of countries except Canada, Mexico.

However, the import tariffs are typically lower among trading partners who are party to different agreements such as Free Trade agreements (FTA), Comprehensive Economic Agreement (CEA) etc. For example, India has trade agreementswith a number of countries including ASEAN, whereby the tariff on a number of products among the ASEAN countries is gradually being brought down to zero. Many of ASEAN members are importers of plastics (HS code 39) and India currently has very limited share in these markets (see Table 4), thereby presenting an opportunity.

Non Trade Barriers

These refers to legislations/other technical requirements that make it very expensive for Indian products to access a particular market. For example the cost of certifications of food grade plastics products in US and Europe are high at around $ 4000-5000 per product per year[1], thus making it very difficult for Indian SMEs to target these markets.

As such it may be easier for a new exporters to start with Asian markets, where the customers’ preferences are similar to India. However a detailed analysis of market size and competitiveness of our products vis a vis other suppliers is a must.

Market Entry Strategy

Having selected the market, a company can choose to enter the market by directly contacting the buyer, selling to a local distributor or participating in a joint venture with a local partner.The trade fairsand buyer’s sellers meet are commonly used by SMEs to identify the buyers as well as test market their products. Some of the trade fairs related to plastics industry include National Plastics Exhibition (NPE), USA, Chinaplas (a plastics and rubber trade fare in China) and Plastindia (Plastic trade fare in India).

The ministry of MSME offers a number of schemes to exporters for market development assistance including exposure visits to foreign markets and concessions in stall charges and air fare to participate in exhibition. These schemes are administrated by Plastics Export Promotion Council (PLEXCONCIL) or Federation of Indian exporters (FIEO), who also organise trade fares in India and facilitate meeting with international buyers.

Meet The Technical Requirements

The exporters need to comply with the technical requirements of the destination country and obtain relevant product certifications. These certifications can be broadly divided into two parts: certifications related to process and safety such as ISO and product related certifications.In general, product certifications required for US and Europe markets are more stringent than those needed for Asian, African and other markets. A summary of important certifications across plastic products is provided below.

Table 4. Technical Certifications for plastics products

Country

Certifications

Injection moulded products

ISO and product certification based on applications

Pipes and fittings

Water Regulation Advisory Scheme (WARS) for UK, NSF for USA, DVGW for Germany

Estimate The Capital Investment And Profitability Of Export Market

The costs can be divided into two categories: fixed cost and variable costs. The fixed cost or capital investment required for the export market would depend on the product adaptations/customisations, certification costs and working capital requirements.The working capital cycle can be up to 3 months including the time realised in getting the payment from the buyers as well as for claiming refunds/incentives from the government.

The price of the product in foreign markets should factor the costs such as commercial costs (shipping, packaging, and duties, insurance), marketing costs over and above the product cost.The marketing expenses such as cost of catalog, samples and visits to the destination country can add up to a significant chunk.

Some of the common costs that are incurred by the exporters include transport cost from factory to port of departure, import duty and taxes, custom clearance, ground transportation from port to customer’s warehouse and marketing agent’s commission.

As such the exporter needs to factor in both fixed and variable before quoting the price and also estimate the minimum volumes they need to sell to recover their costs.

Secure The Order And Finalise Trade Terms

Once the buyer is interested in your product, the next steps would be to finalise the trade terms also known as Incoterms. These typically define the responsibilities of buyers and sellers and costs and risks undertaken by each party. Some of the commonly used terms include EXW (pricing is ex-factory and buyer is responsible for the transport/insurance), FOB (Free on Board, pricing includes cost of transport till the port of origin) and CIF (Cost insurance and freight, the pricing includes the freight costs and insurance required for transporting the goods to destination).

How Can We Help?

If you are interested in exporting your plastics products, we can assist you in the following

Identifying potential markets for your products

Viability study for entering a particular market

Assistance in generating a list of potential buyers and in scheduling meetings

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Table sauce is a common condiment for a number of products such as bakery, Chinese food and fast food. It is typically used to add flavour or texture while cooking or dipping. Broadly, there are four categories of sauces

Tomato Ketchup & Sauce

Chinese Sauces

Pizza, Pasta & Barbeque Sauces

Mayonnaise and other bread spreads

Industry

The table sauce category in India, estimated to over INR 1000 crores is growing at over 20 per cent per annum[1]. Tomato sauce accounts for over 65% of the table sauce consumption, other categories (such as Chinese sauces, Mayonnaise), while relatively smaller in size are also growing rapidly.

Innovation in variants and packaging is the key driver for the growth of this industry. For example Nestle has introduced a number of variants of its tomato sauce (no onion tomato sauce, hot and sweet tomato sauce, masala sauce, tamarind sauce) over the years. The company has also launched pichkoo, where the sauce is packaged in flexible packaging material, thus allowing it to be squeezed easily. Similarly, Dr. Oteker, India (manufacturer of Fun food brand of products) offers a large variety of products including mayonnaises, sauces, spreads, salad dressings, cakes, dessert toppings. For its mayonnaise range alone, the company sells 8 flavours.

Sauce manufacturers have two business models: Business to Business (B to B) and Business to Consumer (B to C). Small and medium enterprises typically start with supplying to businesses and then go retail. For example, Fun foods has been associated with subway in developing customized variants of sauces. Veeba foods, a recent entrant in the market which supplies sauces and dips to restaurants and fast-food chains, recently raised $6 million and forayed in retail segment through its own VEEBA brand[2].

Why is table sauce manufacturing an attractive opportunity?

Increasing customer appreciation for western cuisine has resulted in a growth of sauces, dressings and condiments industry. International cuisines such as Italian, Mexican and Thai are gaining popularity which in turn act as demand drivers for specialised sauces and dressings. Given the market growth, many multinational fast food chains (Wendy’s, Taco bells) have entered India in the past five years. India is the second largest market for Domino’s Pizza after the US.

Besides consuming the sauces as part of eating out, consumers are also purchasing these sauces to use them for food preparation. The cooking sauce (soya sauce, pasta sauce) category makes up around 33 per cent of the sauce market. Supermarkets and convenience stores have become popular channels for purchase of such products.

Where is the table sauce manufacturers located?

The industry can be categorised into two types of players: large FMCG multinational companies such as HLL, Nestle that dominate tomato ketchup market and other players (see Table 1) such as Dr. Oetker, Delmonte specialising in specific category of sauces. Most of the manufacturing units are located in Maharashtra, Haryana and New Delhi.

Down south, post bifurcation, both Andhra Pradesh and Telangana have been focussing on developing food processing sector by offering financial incentives to the food processing industry and developing industrial infrastructure. Although these two states together account for almost 20 per cent of food processing factories in the country, they don’t have many table sauce manufacturing units, thus making it an attractive opportunity to set up a sauce manufacturing unit here.

Manufacturing process and capital requirements

Sauces can be prepared from varied range of items such as eggs, vegetables, fruits, beans, milk etc. as shown in Figure1.

Figure 1: Sauce Manufacturing Process

In addition to the processing machinery discussed above, the manufacring facility needs to have infrastructure including cold storage, waste water treatment facilities and a strong R&D team. The budget required for an entry level capacity of around 1 tonne per day would be over INR 2 crore.

Key Success factors

Critical success factors for this business include:

Nimbleness in identifying variants

Good relationships with exiting suppliers and customers

Building up a niche segment

A strong R&D team that can develop new products

Adequate financing to meet large working capital needs

How we can help you

If you are interested in setting up a table sauce manufacturing unit, we can assist you in the following:

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Flavouring additives are used in Ready-to-eat, Ready-to-cook products and beverages to enhance or modify their taste. Broadly, there are two types of flavouring agents:

Powdered flavouring additives that are extracted from vegetables, fruits and meat. These are used across a number of products such as instant noodles, pizza, snacks, etc. They are low in moisture and thus are more stable and have greater shelf life. The common process of manufacturing these additives involves roasting, extracting, blending, drying, pulverizing, and sieving followed by packaging. Some of the examples of powdered flavours include noodle masala mix, dried vegetable powder, chicken extract powder.

Liquid flavouring additives that are typically extracted from plants and herbs. The process of extraction involves solvent extraction, distillation, filtration, sterilization, and concentration followed by packaging. Oleoresins, Aloe Vera extract etc. come under this category.

Industry

The Indian food flavour market is estimated at around INR 15.5 billion and has been growing at around 10 per cent per annum . The market has about 100 players , including large international and domestic players as well as many small and medium enterprises. Top international players and large domestic players account for around 70 % of the market share – these comprise Givaudan (Switzerland), International Flavours & Fragrances (IFF, US), Firmenich (Switzerland), Symrise (Germany), Takasago International Corporation (Japan) and MANE (France) and SH Kelkar (Pune), Sachee Aromatics (New Delhi), Oriental Flavours & Fragrances (Valsad, Gujarat). The main customers of these are large FMCG companies, tobacco manufacturers, ice cream manufacturers and pharmaceutical companies.

Why is flavour manufacturing an attractive opportunity?

The expenditure on food accounts for 43 per cent of house hold expenditure and is growing at an annual rate of 12-13 per cent . A steady rise in consumer spend on eating out and groceries is helping packaged food (ready to eat products, biscuits, and beverages) and the food service market (quick service restaurants, home delivery of food) , which are also experiencing growth in double digits . All these factors point to a growing demand for flavour additives.

Also, flavour manufacturing is a niche business, with entry barriers such as sustained R&D efforts, long customer acquisition time and access to raw materials.

Where are the domestic flavour manufacturers located?

Most of the flavour manufacturing units are located in Maharashtra, Gujarat and Kerala as these states offer proximity to end users and easy access to raw materials such as aroma chemicals and spices/herbs.

Down south, Post bifurcation, both Andhra Pradesh and Telangana have been focussing on developing food processing sector by offering financial incentives to food processing industry and developing industrial infrastructure. Although, these two states together account for almost 20 per cent of food processing factories in the country, they don’t have many flavour manufacturing units (see Table 1), thus making it an attractive opportunity to set up a flavour manufacturing units here.

Typical operating requirements

The cost of machinery and working capital needs for an entry level capacity of around 1 tonne per day would be around INR 2 crore. The machinery depends on whether the extract is in powder or liquid form. For extracting a powder, solvent extraction method is used, whereas for extracting a liquid (oil), apart from solvent extraction, distillation or super critical fluid extraction methods are also used. Table 2 shows the typical machinery required for an entry level plant.

Key success factors

Critical success factors for this business include:

Nimbleness in identifying new segments such as ready-to-eat foods, branded snacks, fruit-based/energy drinks for growth

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PSC sleeper refers to steel reinforced concrete sleeper, commonly used on railway tracks. Besides Indian Railways, power plants, refineries and cement plants also use sleepers for their rail tracks. Demand driver

Indian Railways has a network of over 65,000 kilometers encompassing length and breadth of the country. The growing population and increasing economic activity has resulted in over-utilization of its existing network. So much so that the trunk routes of the railways comprising merely 16% of the network carry about 50 percent of the work load. The Indian railways has been routinely upgrading its network (see Table 1), however the capacity upgradation has been far below the actual requirements and the network continues to remain congested.

The pace of railway infrastructure upgradation has picked up over the past one year, driven by the government’s initiatives to improve quality and safety of Indian railways. The Railways has committed to building 7 kms of infrastructure per day in 2016-17, which will increase to 13 Kms per day in 2017-18 and 19 kms per day in 2018-19. Railways have identified following priority projects (See table 2) to be taken up in the medium term.

In addition to these, Indian Railways has also proposed to create a high speed corridor network of around 10,000 kilometers. In light of the above mentioned plans, the railways are likely to develop at least 5000-8000 kilometers of rail network per year, almost 30-40% more than in the past. Assuming that per kilomer of rail would need 1600 sleepers, these plans are likely to result in an annual demand of about 1.3 crore of sleepers.

Key suppliers

The sleeper industry is dominated by a few players who are present across the country. The current capacity of the industry is around 1 crore sleepers per annum. More details on the players are provided below.

Given the expected increase in demand by 30% to 40%, there seems to be enough room for new capacities to come up. However, one needs to analyze the regional demand and supply balance carefully.

Govt approvals and Budget

Setting up a railway sleeper unit would require approvals from Railway RDSO (Research Design and Standards Organization) as well as the Zonal Railway office.

The process of manufacturing the PSC entails strengthening of concrete, casting it into pre-defined mould and curing it. There are two popular technologies: Long line and Short bench manufacturing, with short bench manufacturing being more popular in India.

The budget requirements for a capacity of 3-4 lakh sleepers per annum could be upwards of Rs. 15 crore. Further, one needs to consider the cost of the land, the sleeper plant would need to be located in the vicinity of a railway station for the ease of transport of sleepers.

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We can help you assess techno economic feasibility of a sleeper manufacturing plant including the market assessment, regulatory compliance framework, capital requirements, machinery evaluation and profitability and return on investment.

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Ever thought about what happens to the cold drink/juice/mineral water bottle after we have discarded it. About 70 per cent of PET bottles are recycled and reused in textile and packaging industry.

India is one of the largest recyclers of PET in the world, next only to China. The industry is growing at a rate of more than 25 per cent per annum. India consumes around 800,000 tonnes of PET resins annually, around 70 per cent of which is collected and recycled. PET recycling business has a turnover of Rs 3,500 crore[1].

PET recycling business is concentrated in Maharashtra and Gujarat, textile and packaging hubs of the country. There are not many PET recycling units in Andhra Pradesh and Telangana. Given that both Telangana and Andhra Pradesh are bountiful in cotton and have identified textile as a focus sector, PET recycling can be an attractive opportunity.

PET Recycling Process

PET bottles are collected by rag pickers and eventually find their way in the recycling factories. Here the bottles are crushed to make PET flakes that are cleaned, cleared of other polymers, hot washed and dried. These flakes can be further processed into fibres (for textile) or injection moulded/ blow moulded for other applications. The quality of PET is measured in terms of its purity (PPM, particle per million of impurities) and its hardness (Intrinsic viscosity, IV). The quality of PET flakes is dependent on the input as well efficiency of the washing process.

Market

In India recycled PET (R PET) is not allowed for packaging of food items. The key end use applications of RPET include textiles, PET straps and home furnishing. Nearly 70-80 per cent of R pet is consumed in textile industry.

Products can be made from PET Flakes

The industry players are of two types, PET flakes manufacturers and integrated players who process the flakes into fibre or other products. The table below describes some of the integrated players.

Budget

A PET flakes manufacturing unit (comprising PET grinder and washing line) of a capacity of 300 kg per hour can be set up within a budget of Rs. 1 crore. The land requirement would be around 1000 sft. One also needs to develop a strong network of/chain to collect PET waste.

How can we help?

We can help you set up PET recycling unit through a number of services including market viability assessment, technical consultation and project execution support.

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Medical devices refer to devices and consumables used by the doctors and hospitals in patient care. It is a multi-product industry comprising consumables, surgical instruments, implants and diagnostic reagents. The industry size is estimated to be INR. 30,000 crores, with imports accounting for 70 per cent of the industry turnover. The industry is growing in double digits.

The sector offers huge opportunity for entrepreneurs to offer cost competitive products that can reduce our dependence on imports and make healthcare more affordable and accessible to all.

What are the key segments?

The market can be divided into four categories, as shown below

Picture 1: Indian Medical device Industry

Who are the large manufacturers?

The Indian market is dominated by international players such as Abbott Vascular, GE health care, Phillips health Care, Medtronic, Johnson and Johnson, Siemens, Baxter, Stryker, Zimmer holdings and many more.

Among the Indian manufacturers, there are around 800 companies, majority of them are present in price competitive consumable segment. Some of the interesting Indian players who have been able to offer technology based differentiated products are as under. (See table 1)

Table 1: Medical devices manufacturers-interesting companies

Where is the opportunity?

The equipment and surgical segment and implants offer attractive opportunity for manufacturing indigenous products that can reduce our import dependence. These segments have been described in the table below.

Opportunities to create new products that are not available in the market before For example- Cost effective diagnostic solutions for poor and rural population. Some of the companies that work in this area include Forus health care (Eye screening devices) and Biosense Technologies (cost effective solutions for checking blood sugar, anaemia etc).

What are the challenges?

As per Dr. Ashutosh Mundkur, a senior medical device industry professional and start up mentor, a medical device start-up faces following challenges:

Inadequate market research: The market assessment about the need for the device and its ability to either cut the healthcare cost or improve user experience has to be clearly established. Many companies discover their inability to sell the product after they have launched the product in the market

Lack of adequate attention to quality and safety aspects of the device: Many a time’s start-ups are too focussed on reducing the cost of the device to make it competitive Vis a Vis imported products and do not pay enough attention to the quality aspects.

Regulatory hurdles: There is lack of clarity on license required for manufacturing medical devices. As per the current regulations, the CDSCO license (Central Drug Standards Control Organisation) is needed for 14 notified devices[1]. For the remaining, it is left to the state Drug controller office/CDSCO to decide whether a license is needed. However regulatory hurdles are expected to clear after passage of new medical device regulation, which is currently under review and awaits parliamentary approval

Funding: Investor interest in early stage medical device start-ups remains low, due to uncertainty about the device’s potential to make it big and long development time. Some of the funds[2] that have invested in health care start-ups include Avishkar, Acumen, Centre for innovation and entrepreneurship (CIE, IIMA), Unitus, Venture East and Viligro

Conclusion

With the rising disposable incomes and increasing longevity, the demand for better health care is only going to rise. Medical devices are instrumental in making health care more affordable and accessible. The ecosystem for the medical device companies is expected to improve with government’s effort to promote manufacturing in India. As such, growing demand and improving regulatory outlook, make medical device manufacturing a very attractive segment.

How can we help you?

We can help you start a medical device manufacturing business through a number of services including business viability assessment, market landscaping and expert consultation.

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On demand laundry refers to a service whereby people/organizations can outsource the washing, drying and ironing of their clothes at their convenience. The service which has been traditionally provided by dhobis is now attracting new players, who take order through a website/app, and provide delivery at the customers’ doorstep.

The customers include urban population, people living in hostels, paying guest accommodation as well as institutions such as Indian Railways, hotels, hospitals and guest houses who are looking to outsource their laundry services. The opportunity is large and is estimated to be over Rs. 5200 crores.[1]

Hyderabad Market

Other than the neighborhood dhobi, there are a number of organized players already in the market (see table 1). These players offer self-service (whereby people can wash their clothes themselves by using the washing machines provided by the company) as well as pick up, wash and delivery of clothes.

Table1: Hyderabad market

Capital requirements and profitability

The capital is required for rentals, machinery, working capital and marketing expenses. The machinery includes washer, water remover, dryers and ironing equipment. Price of the machinery would vary based on the capacity of machine and can be up to Rs. 7 lakhs for a capacity of 60 kg/cycle. Further, one needs funds for paying the rent, electricity bills and marketing expenses. As such, the business can be started within a budget of Rs. 20 lakhs and profitability would depend on your ability to market your services.

How can we help you

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and business diagnostics. We can help you understand the feasibility and viability of laundry services and related opportunities including market study, machinery, overall capital requirements and profitability.

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You have built a successful business and are looking for growth opportunities. You can either invest in your existing business or consider new ventures. The following five parameters may help you decide if your business is attractive enough for you to put in additional resources.

Market size: If you want to grow fast, the market has to be big enough for you to sell your goods to large volume of customers. Sometimes, you may discover that your market is too small to be worth pursuing.

Say you are providing an online platform to hire domestic help in a particular city. The city has 10 lakh households, of which 10% or 1 lakh households are your target customers. If you can convert 10% of that eventually, you can get 10,000 customers. Assuming you earn a commission of Rs. 1000 per customer, your revenue could be at best Rs.1 crore and profit perhaps 10 lakh. That may be too small, but if you are able to replicate the same model in other cities, the business may be worth pursuing.

Customer acquisition cost and customer life time value: Customer acquisition cost refers to costs incurred in obtaining new clients. These include salaries of marketing staff, advertising spend and discounts offered.

Say, to attract 1000 customers, you spend Rs. 50,000 in advertising, deploy one sales manager at a monthly salary of Rs. 30,000 and offer discounts worth Rs. 10,000. Your customer acquisition expense then is 90,000 or Rs. 900 per customer. Your revenue per customer should be at least 4-5 times the acquisition cost for your business to be profitable. However, revenue can be spread over 5-10 years of your engagement with the customers and need not be from just one transaction. So, the more repeat customers you have, the customer life time value would be higher and so would be your profitability.

Fixed versus variable costs: Businesses have two types of costs: fixed costs and variable costs. While fixed costs such as rents, salaries, and interest do not change with the increase or decrease in sales volumes, variable costs such as raw material, transport charges vary with the number of units produced or sold.

Higher fixed costs implies that it would take you a long time before you can start making profits, but profits would grow sharply once you achieve critical mass (breakeven point).

Get to know your fixed and variable costs and breakeven point. If you have already achieved the critical mass, it’s time to stay put and enjoy better profitability.

Operating profits: Refers to profits that remain after meeting all operating costs (i.e., all above mentioned costs except interest, depreciation). If your operating profitability is declining, you would need to conduct a thorough diagnostic assessment of your business.

Return on capital employed: Operating profit alone is not enough; return has to be analysed in the context of the capital that is deployed in your business. For instance, if your average annual operating profit is around Rs. 25 lakh and the total capital deployed in the business is Rs. 5 crore, then your return on the capital is only 5%. This kind of return can also be generated by simply putting your money in a fixed deposit.

How can we help?

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and business diagnostics. We can help you assess your market, determine customer acquisition and lifetime value costs, your operating profits and return on capital, and recommend ways to improve profitability or expand your business.